Enhanced Investments - Financial Portal

Published: 2020-10-26

West Fraser Timber Co. Ltd.Condensed Consolidated Balance Sheets(in millions of Canadian dollars, except where indicated - unaudited)
	September 30 December 31
		2020	2019
AssetsCurrent assetsCash and short-term investments
		313	$	16	$
Receivables		417		258
Income taxes receivable		-		135
Inventories (note 5)		678		729
Prepaid expenses		18		9
		1,426		1,147
Property, plant and equipment		2,155		2,140
Timber licences		478		493
Goodwill and other intangibles		776		772
Export duty deposits (note 14)		103		80
Other assets		25		26
Deferred income tax assets		10		10
		4,973	$	4,668	$
LiabilitiesCurrent liabilitiesCheques issued in excess of funds on deposit
		-	$	16	$
Operating loans (note 6)		-		374
Payables and accrued liabilities		545		396
Current portion of long-term debt (note 6)		10		10
Current portion of reforestation and decommissioning obligations		44		41
Income taxes payable		68		-
		667		837
Long-term debt (note 6)		667		650
Other liabilities (note 7)		552		454
Deferred income tax liabilities		271		253
		2,157		2,194
Shareholders' EquityShare capital
		484		483
Accumulated other comprehensive earnings		151		132
Retained earnings		2,181		1,859
		2,816		2,474
		4,973	$	4,668	$
Number of Common shares and Class B Common shares outstanding at October 26, 2020 was 68,676,897.

- 2 -
	West Fraser Timber Co. Ltd.Condensed Consolidated Statements of Changes in Shareholders' Equity(in millions of Canadian dollars, except where indicated - unaudited)
		July 1 to September 30 January 1 to September 30
		2020	2019	2020	2019
	Share capital Balance - beginning of period
		484	$			483	$	484	$	491	$
	Issuance of Common shares	-				-		-		1
	Repurchase of Common shares	-				-		-		(9)
	Balance - end of period	484	$			483	$	484	$	483	$
	Accumulated other comprehensive earnings Balance - beginning of period
		166	$			137	$	132	$	170	$
	Translation gain (loss) on foreign operations	(15)				9		19		(24)
	Balance - end of period	151	$			146	$	151	$	146	$
	Retained earningsBalance - beginning of period
		1,820	$			2,001	$	1,859	$	2,235	$
	Actuarial gain (loss) on post-retirement benefits	24				10		(47)		(62)
	Repurchase of Common shares	-				-		-		(72)
	Earnings for the period	350				(45)		410		(108)
	Dividends	(13)				(14)		(41)		(41)
	Balance - end of period	2,181	$			1,952	$	2,181	$	1,952	$
	Shareholders' Equity	2,816	$			2,581	$	2,816	$	2,581	$

- 3 -
	West Fraser Timber Co. Ltd.Condensed Consolidated Statements of Earnings and Comprehensive Earnings(in millions of Canadian dollars, except where indicated - unaudited)
		July 1 to September 30 January 1 to September 30
		2020	2019	2020	2019
	Sales	1,690				$	1,190	$	4,161	$	3,748	$
	Costs and expensesCost of products sold
		838					906		2,538		2,822
	Freight and other distribution costs	175					181		527		547
	Export duties (note 14)	49					44		126		127
	Amortization	66					65		201		193
	Selling, general and administration	72					48		180		158
	Equity-based compensation	3					1		6		4
	Restructuring and impairment charges	-					(1)		-		25
		1,203					1,244		3,578		3,876
	Operating earnings	487					(54)		583		(128)
	Finance expense	(11)					(12)		(40)		(36)
	Other (note 10)	(11)					2		(2)		(9)
	Earnings before tax	465					(64)		541		(173)
	Tax recovery (provision) (note 11)	(115)					19		(131)		65
	Earnings	350				$	(45)	$	410	$	(108)	$
	Earnings per share (dollars) (note 12)Basic
		5.09				$	(0.65)	$	5.97	$	(1.57)	$
	Diluted	5.09				$	(0.73)	$	5.97	$	(1.77)	$
	Comprehensive earningsEarnings
		350				$	(45)	$	410	$	(108)	$
	Other comprehensive earningsTranslation gain (loss) on foreign operations
		(15)					9		19		(24)
	Actuarial gain (loss) on post-retirement benefits	24					10		(47)		(62)
	Comprehensive earnings	359				$	(26)	$	382	$	(194)	$

- 4 -
	West Fraser Timber Co. Ltd.Condensed Consolidated Statements of Cash Flows(in millions of Canadian dollars, except where indicated - unaudited)
		July 1 to September 30 January 1 to September 30
	Cash provided by (used in)	2020	2019	2020	2019
	Operating activitiesEarnings
		350	$			(45)			$	410		$	(108)	$
	Adjustments
	Amortization	66				65				201			193
	Restructuring and impairment charges	-				(1)				-			25
	Restructuring charges paid	-				(6)				-			(6)
	Finance expense	11				12				40			36
	Exchange loss (gain) on long-term financing	1				(1)				(2)			2
	Exchange loss (gain) on export duty deposits	1				(1)				(3)			2
	Export duty deposits	(8)				2				(18)			(2)
	Post-retirement expense	25				19				75			60
	Contributions to post-retirement benefit plans	(12)				(23)				(41)			(61)
	Tax provision (recovery)	115				(19)				131			(65)
	Income taxes received (paid)	14				10				103			(85)
	Reforestation and decommissioning obligations	(18)				(16)				(7)			(10)
	Other	12				2				5			8
	Changes in non-cash working capital
	Receivables	(69)				55				(160)			32
	Inventories	(27)				67				58			127
	Prepaid expenses	4				12				(9)			(4)
	Payables and accrued liabilities	148				(16)				147			(69)
		613				116				930			75
	Financing activitiesProceeds from (repayment of) operating loans
		(360)				68				(377)			253
	Finance expense paid	(4)				(6)				(29)			(27)
	Repurchase of Common shares	-				-				-			(81)
	Dividends	(13)				(13)				(41)			(41)
	Other	(3)				(4)				(3)			(5)
		(380)				45				(450)			99
	Investing activitiesAdditions to capital assets
		(60)				(133)				(179)			(323)
	Government assistance	-				-				1			5
	Proceeds from disposal of capital assets	7				5				13			12
	Other	(1)				1				-			2
		(54)				(127)				(165)			(304)
	Change in cash	179				34				315			(130)
	Foreign exchange effect on cash	7				(1)				(2)			(4)
	Cash - beginning of period	127				(20)				-			147
	Cash - end of period	313	$			13			$	313		$	13	$
	Cash consists ofCash and short-term investments
				313			$	17			$
	Cheques issued in excess of funds on deposit			-				(4)
				313			$	13			$

- 5 -
	West Fraser Timber Co. Ltd. Notes to Condensed Consolidated Interim Financial Statements (figures are in millions of dollars, except where indicated - unaudited)
	1. Nature of operations
	West Fraser Timber Co. Ltd. ("West Fraser", "we", "us" or "our") is a diversified wood products company producing lumber, LVL, MDF, plywood, pulp, newsprint, wood chips, and energy with facilities in western Canada and the southern United States. Our executive office is located at 858 Beatty Street, Suite 501, Vancouver, British Columbia. West Fraser was formed by articles of amalgamation under the Business Corporations Act (British Columbia) and is registered in British Columbia, Canada. Our Common shares are listed for trading on the Toronto Stock Exchange under the symbol WFT.
	2. Basis of presentation and statement of compliance
	These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting as issued by the International Accounting Standards Board, and use the same accounting policies and methods of their application as the December 31, 2019, annual audited consolidated financial statements. These condensed consolidated interim financial statements should be read in conjunction with our 2019 annual audited consolidated financial statements.
	3. Use of estimates and judgments and Coronavirus (COVID-19)
	Financial statement preparation requires management to use accounting estimates and make judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The estimates and underlying assumptions are based on historical experience and other factors, including expectations of future events that are considered to be reasonable under the circumstances.
	Given the ongoing and dynamic nature of the COVID-19 outbreak, it is challenging to predict the impact on our Company. The extent of such impact will depend on future developments, which are highly uncertain, including the resurgence of COVID-19 as restrictions are eased or lifted, new information that may emerge concerning the spread and severity of COVID-19, and actions taken to address its impact, among others. It is difficult to predict how this virus may affect our business in the future, including its effect (positive or negative; long or short term) on the demand and price for our products. It is possible that COVID-19, particularly if it has a prolonged duration, could have a material adverse effect on our supply chain, market pricing, customer demand, and distribution networks. These factors may further impact our operating plans, business, financial condition, liquidity, and operating results, which would, in turn, affect our estimates, including the valuation of inventories, allowance for expected credit losses, fair value measurements, the valuation of long-lived assets, and cash flow projections used for impairment testing. Actual results may materially differ from these estimates.
	4. Seasonality of operations
	Our operating results are subject to seasonal fluctuations that impact quarter-to-quarter operating results. Log availability has a direct impact on our operations. We build up log inventory in Canada during the winter to sustain our lumber and plywood production during the second quarter when logging is curtailed due to wet and inaccessible land conditions. Extreme weather conditions, wildfires in Western Canada, and hurricanes in the U.S. South may periodically affect operations, including logging, manufacturing, and transportation. Consequently, interim operating results may not proportionately reflect operating results for a full year.

- 6 -
	5. Inventories
	Inventories at September 30, 2020 were subject to a valuation reserve of $2 million (June 30, 2020 - $13 million; December 31, 2019 - $39 million; September 30, 2019 - $46 million) to reflect net realizable value being lower than cost.
			September 30, 2020	December 31, 2019
	Manufactured products	$		334	$		341
	Logs and other raw materials			175			226
	Processing materials and supplies			169			162
		$		678	$		729
	6. Operating loans and long-term debt
	Operating loans
	Our revolving lines of credit consist of an $850 million committed revolving credit facility which matures August 25, 2024, a $150 million committed revolving credit facility which matures April 9, 2022, a $33 million (US$25 million) demand line of credit dedicated to our U.S. operations, and an $8 million demand line of credit dedicated to our jointly-owned newsprint operation. On September 30, 2020, there were no amounts outstanding under our revolving credit facilities. As a result, the associated deferred financing costs of $3 million were recorded in other assets.
	Interest on the facilities is payable at floating rates based on Prime, Base Rate Advances, Bankers' Acceptances, or LIBOR Advances at our option plus an applicable margin.
	In addition, we have credit facilities totalling $130 million dedicated to letters of credit, of which US$15 million is dedicated to our U.S. operations. On September 30, 2020, our letter of credit facilities supported $62 million of open letters of credit.
	All debt is unsecured except the $8 million joint operation demand line of credit, which is secured by that operation's current assets.
	Long-term debt
			September 30, 2020			December 31, 2019
	US$300 million senior notes due October 2024;
	interest at 4.35%	$		400	$		390
	US$200 million term loan due August 2024; floating
	interest rate			267	260
	US$8 million note payable due March 2021; interest
	at 2%			10	10
	Notes payable			3			3
				680			663
	Less: deferred financing costs			(3)			(3)
	Less: current portion related to the US$8 million note
	payable due March 2021			(10)	(10)
		$		667	$		650
	The fair value of the long-term debt at September 30, 2020, was $684 million (December 31, 2019 - $677 million) based on rates available to us at the balance sheet date for long-term debt with similar terms and remaining maturities.

- 7 -
	On March 9, 2020, we extended the duration of our interest rate swap from August 2022 to August 2024, resulting in a change to the fixed interest rate on the swap from 2.47% to 1.78% through August of 2024. We continue to receive a floating interest rate equal to 3-month LIBOR over the duration. The result is a fixed interest rate of 2.47% for the period of May 28, 2019 to February 25, 2020, and 1.78% for the period of February 25, 2020 to August 25, 2024. On April 15, 2020, we entered into additional interest rate swaps for a total notional amount of US$100 million. Under the agreements, we pay a combined fixed interest rate of 0.51% and receive a floating interest rate equal to 3-month LIBOR.
	The agreements are accounted for as a derivative, and the gain or loss related to changes in the fair value is included in other income. For the nine months ended September 30, 2020, a $6 million loss was recorded.
	7. Other liabilities
			September 30, 2020	December 31, 2019
	Post-retirement (note 8)	$		416	$	314
	Long-term portion of reforestation			63		74
	Long-term portion of decommissioning			35		31
	Other			38		35
		$		552	$	454
	8. Post-retirement benefits
	We maintain defined benefit and defined contribution pension plans covering a majority of our employees. The defined benefit plans generally do not require employee contributions and provide a guaranteed level of pension payable for life, based either on length of service or on earnings and length of service, and in most cases do not increase after the commencement of retirement. We also provide group life insurance, medical and extended health benefits to certain employee groups.
	The status of the defined benefit pension plans and other retirement benefit plans, in aggregate, is as follows:
			September 30, 2020	December 31, 2019
	Projected benefit obligations	$		(1,862)	$	(1,693)
	Fair value of plan assets			1,449		1,385
		$		(413)	$	(308)
	Represented by:
	Post-retirement assets	$		3	$	6
	Post-retirement liabilities			(416)		(314)
		$		(413)	$	(308)
	The significant actuarial assumptions used to determine our balance sheet date post-retirement assets and liabilities are as follows:
				September 30, 2020	June 30, 2020		December 31, 2019
	Discount rate	2.75%					2.75%	3.00%
	Future compensation rate increase	3.50%					3.50%	3.50%
	For the nine months ended September 30, 2020, we recognized in other comprehensive earnings a before-tax loss of $62 million to reflect the changes in the valuation of the post-retirement benefit plans. The loss reflects the decrease in the discount rate used to calculate plan liabilities from the beginning of the year, partially offset by the return on plan assets.

- 8 -
	The actuarial gain (loss) on post-retirement benefits, included in other comprehensive earnings, is as follows:
		July 1 to September 30		January 1 to September 30
				2020		2019		2020	2019
	Actuarial gain (loss)		$	33	$	13	$		(62)	$	(82)
	Tax recovery (provision)			(9)		(3)			15		20
			$	24	$	10	$		(47)	$	(62)
	9. Share Capital
	Our Normal Course Issuer Bid ("NCIB") under which we were authorized to purchase up to 3,318,823 of our Common shares expired on September 19, 2020. We did not repurchase any Common shares under this NCIB and we have not renewed the NCIB.
	10. Other
		July 1 to September 30		January 1 to September 30
				2020		2019		2020	2019
	Exchange gain (loss) on working capital		$	(2)	$	1	$		2	$	(4)
	Exchange gain (loss) on intercompany
	financing1			(15)		9			20		(22)
	Exchange gain (loss) on long-term debt			14		(8)			(18)		20
	Exchange gain (loss) on export duty
	deposits receivable			(1)		1			3		(2)
	Insurance gain on involuntary disposal of
	equipment2			-		-			7		-
	Gain (loss) on interest rate swap contracts
								1	-			(6)	(4)
	(note 6)
	Power purchase dispute3			(8)		-			(8)		-
	Other			-		(1)			(2)		3
			$	(11)	$	2	$		(2)	$	(9)
	1.	Relates to US$550 million intercompany financing provided to our U.S. operations. IAS 21 requires that the exchange gain or loss be recognized through earnings as the financing is not considered part of our permanent investment in our U.S. subsidiaries. The balance sheet amounts, and related financing expenses are eliminated in these consolidated financial statements.
	2.	Represents insurance proceeds related to the settlement of WestPine's 2016 involuntary disposal of equipment.
	3.	During this quarter, as a result of certain administrative proceedings, we determined that a liability related to certain retroactive adjustments to charges under a purchase power agreement (the "Power Purchase Agreement"), terminated in 2016, should be recorded as a contingent liability. Although we dispute responsibility for such retroactive adjustments and the associated liability, we have accrued $8 million for such contingent liability. However, recognizing the expense does not prejudice our position that the liability is not our responsibility.

- 9 -
	11. Tax provision
	The tax provision differs from the amount that would have resulted from applying the British Columbia statutory income tax rate to earnings before tax as follows:
		July 1 to September 30		January 1 to September 30
				2020			2019		2020			2019
	Income tax recovery (expense) at
	statutory rate of 27%		$	(125)		$	17	$	(146)		$	47
	Non-taxable amounts			(4)			2					(2)		3
	Rate differentials between jurisdictions
	and on specified activities			14			-					17		(2)
	Decrease in Alberta provincial tax rate1			-			-					-		17
			$	(115)		$	19	$	(131)		$	65
	1.	Represents the re-measurement of deferred income tax assets and liabilities for the 2019 Alberta tax rate change from 12% to 8% over the next four years.

	12. Earnings per share
	Basic earnings per share is calculated based on earnings available to Common shareholders, as set out below, using the weighted average number of Common shares and Class B Common shares outstanding.
	Diluted earnings per share is calculated based on earnings available to Common shareholders adjusted to remove the actual share option expense (recovery) charged to earnings and after deducting a notional charge for share option expense assuming the use of the equity-settled method, as set out below. The diluted weighted average number of shares is calculated using the treasury stock method. When earnings available to Common shareholders for diluted earnings per share are greater than earnings available to Common shareholders for basic earnings per share, the calculation is anti-dilutive, and diluted earnings per share are deemed to be the same as basic earnings per share.
		July 1 to September 30		January 1 to September 30
				2020			2019		2020			2019
	Earnings
	Basic		$	350		$	(45)	$				410	$	(108)
	Share option expense (recovery)			12			(5)					7		(11)
	Equity-settled share option adjustment	-			-					(3)		(3)
	Diluted		$	362		$	(50)	$				414	$	(122)

	Weighted average number of shares
	(thousands)
	Basic			68,674			68,657		68,670			68,956
	Share options			301			186					154		306
	Diluted			68,975			68,843		68,824			69,292

	Earnings per share (dollars)
	Basic		$	5.09		$	(0.65)	$	5.97		$	(1.57)
	Diluted		$	5.09		$	(0.73)	$	5.97		$	(1.77)

- 10 -
	13. Segmented information
	The table below provides a reconciliation of our Non-IFRS measure Adjusted EBITDA. This measurement is used by management to evaluate the operating and financial performance of our operating segments, generate future operating plans, and make strategic decisions, including those relating to operating earnings.
					Corporate &
		Lumber	Panels	Pulp & Paper	Other	Total
	July 1, 2020 to September 30, 2020Sales
	To external customers	$ 1,295 $ 174 $ 221 $ - $ 1,690
	To other segments	36 2 - (38) - $ 1,331 $ 176 $ 221 $ (38) $ 1,690
	Cost of products sold	(612) (103) (161) 38 (838)
	Freight and other distribution costs	(118) (14) (43) - (175)
	Selling, general and administration	(49) (8) (12) (3) (72)
	Adjusted EBITDA	$ 552 $ 51 $ 5 $ (3) $ 605
	Export duties	(49) - - - (49)
	Equity-based compensation	- - - (3) (3)
	Amortization	(49) (4) (10) (3) (66)
	Operating earnings	$ 454 $ 47 $ (5) $ (9) $ 487
	Finance expense	(8) (1) (1) (1) (11)
	Other	(5) 1 (8) 1 (11)
	Earnings before tax	$ 441 $ 47 $ (14) $ (9) $ 465
	July 1, 2019 to September 30, 2019Sales
	To external customers	$ 820 $ 146 $ 224 $ - $ 1,190
	To other segments	28 3 - (31) - $ 848 $ 149 $ 224 $ (31) $ 1,190
	Cost of products sold	(654) (115) (168) 31 (906)
	Freight and other distribution costs	(122) (16) (43) - (181)
	Selling, general and administration	(33) (5) (10) - (48)
	Adjusted EBITDA	$ 39 $ 13 $ 3 $ - $ 55
	Export duties	(44) - - - (44)
	Equity-based compensation	- - - (1) (1)
	Amortization	(49) (4) (11) (1) (65)
	Restructuring and impairment charges	1 - - - 1
	Operating earnings	$ (53) $ 9 $ (8) $ (2) $ (54)
	Finance expense	(9) - (2) (1) (12)
	Other	3 - 1 (2) 2
	Earnings before tax	$ (59) $ 9 $ (9) $ (5) $ (64)

- 11 -
		Corporate &
			Lumber	Panels	Pulp & Paper	Other	Total
	January 1, 2020 to September 30, 2020Sales
	To external customers		$ 3,070 $ 430 $ 661 $ - $ 4,161
	To other segments		101 7 - (108) - $ 3,171 $ 437 $ 661 $ (108) $ 4,161
	Cost of products sold		(1,876) (295) (475) 108 (2,538)
	Freight and other distribution costs		(358) (41) (128) - (527)
	Selling, general and administration		(123) (22) (32) (3) (180)
	Adjusted EBITDA		$ 814 $ 79 $ 26 $ (3) $ 916
	Export duties		(126) - - - (126)
	Equity-based compensation		- - - (6) (6)
	Amortization		(149) (11) (32) (9) (201)
	Operating earnings		$ 539 $ 68 $ (6) $ (18) $ 583
	Finance expense		(31) (3) (5) (1) (40)
	Other		6 8 (6) (10) (2)
	Earnings before tax		$ 514 $ 73 $ (17) $ (29) $ 541
	January 1, 2019 to September 30, 2019Sales
	To external customers		$ 2,560 $ 454 $ 734 $ - $ 3,748
	To other segments		97 9 - (106) - $ 2,657 $ 463 $ 734 $ (106) $ 3,748
	Cost of products sold		(2,015) (358) (555) 106 (2,822)
	Freight and other distribution costs		(371) (48) (128) - (547)
	Selling, general and administration		(109) (19) (30) - (158)
	Adjusted EBITDA		$ 162 $ 38 $ 21 $ - $ 221
	Export duties		(127) - - - (127)
	Equity-based compensation		- - - (4) (4)
	Amortization		(147) (11) (32) (3) (193)
	Restructuring and impairment charges		(25) - - - (25)
	Operating earnings		$ (137) $ 27 $ (11) $ (7) $ (128)
	Finance expense		(25) (3) (7) (1) (36)
	Other		(3) - 1 (7) (9)
	Earnings before tax		$ (165) $ 24 $ (17) $ (15) $ (173)

	The geographic distribution of external sales is as follows1:
		July 1 to September 30			January 1 to September 30
				2020				2019		2020		2019
	Canada		$	342			$	235	$			796	$	766
	United States			1,135				720		2,672		2,206
	China			162				155				489		497
	Other Asia			46				74				184		250
	Other			5				6				20		29
			$	1,690			$	1,190	$	4,161	$	3,748
	1.	Sales distribution is based on the location of product delivery.

- 12 -
	14. Countervailing ("CVD") and antidumping ("ADD") duty dispute
	On November 25, 2016, a coalition of U.S. lumber producers petitioned the U.S. Department of Commerce ("USDOC") and the U.S. International Trade Commission ("USITC") to investigate alleged subsidies to Canadian softwood lumber producers and levy countervailing and antidumping duties against Canadian softwood lumber imports. We were chosen by the USDOC as a "mandatory respondent" to both the countervailing and antidumping investigations and, as a result, have received unique company-specific rates.
	Developments in CVD and ADD rates
	On April 24, 2017, the USDOC issued its preliminary determination in the CVD investigation, and on June 26, 2017, the USDOC issued its preliminary determination in the ADD investigation. On December 4, 2017, the duty rates were revised. On February 3, 2020, the USDOC reassessed these rates based on its first Administrative Review ("AR") as noted in the tables below.
	The CVD and ADD rates apply retroactively for each Period of Investigation ("POI"). We record CVD as export duty expense at the cash deposit rate until an AR finalizes a new applicable rate for each POI. We record ADD as export duty expense by estimating the rate to be applied for each POI by using our actual results and the same calculation methodology as the USDOC and adjust when an AR finalizes a new applicable rate for each POI. The difference between the cash deposits and export duty expense is recorded on our balance sheet as export duty deposits receivable.
	On February 3, 2020, the USDOC released the preliminary results from AR1, as shown in the table below. On July 21, 2020, the USDOC issued a new tolling memorandum, which extended the AR1 duty rate finalization to November 2020. The duty rates are subject to an appeal process, and we will record an adjustment once the rates are finalized. If the AR1 rates were to be confirmed, it would result in a U.S. dollar adjustment of US$93 million for the POI covered by AR1. This adjustment would be in addition to the Canadian $103 million receivable balance recorded on our balance sheet on September 30, 2020. If these rates are finalized, our combined cash deposit rate would be revised to 9.08%.
AR1 Cash		AR1 Liability at	AR1 Excess
		Deposits1		9.08%	Deposits
	US$ millions			US$	US$	US$
	CVD			176	78	98
	ADD			68	20	48
	Total			244	98	146
	Recognized as export duty deposits receivable					(53)
	Estimated export duty deposit receivable to be
	recognized.		93
	1.	Cash deposit rates changed during AR1, see footnotes under the CVD and ADD tables below.
	On January 1, 2020, we entered AR3for POI January 1 to December 31, 2020. For the nine months ended September 30, 2020, we expensed ADD at the West Fraser Estimated Rate of 1.85% and CVD at the Cash Deposit Rate of 17.99%. The ADD Cash Deposit Rate remained at 5.57% for the quarter.
	The respective Cash Deposit Rates, the December 4, 2017 Revised Rate, the AR1 Preliminary Rate, and the West Fraser Estimated ADD Rate for each period are as follows:

- 13 -
				AR1 Preliminary
Cash Deposit			Revised Rate2		Rate3
	Effective dates for CVD	Rate	(Dec. 4, 2017)	(Feb. 3, 2020)
	AR1 POI
	April 28, 2017 - August 24, 20171	24.12%	17.99%		7.07%
	August 25, 2017 - December 27, 20171	-				-	-
	December 28, 2017 - December 31, 2017	17.99%	17.99%		7.07%
	January 1, 2018 - December 31, 2018	17.99%	17.99%		7.51%
	AR2 POI
	January 1, 2019 - December 31, 2019	17.99%	17.99%		n/a4
	AR3 POI
	January 1, 2020 - September 30, 2020	17.99%	17.99%		n/a5
	1.	On April 24, 2017, the USDOC issued its preliminary rate in the CVD investigation. The requirement that we make cash deposits for CVD was suspended on August 24, 2017, until the USDOC published the Revised Rate.
	2.	On December 4, 2017, the USDOC revised our CVD Rate effective December 28, 2017.
	3.	On February 3, 2020, the USDOC issued its Preliminary CVD Rate for the AR1 POI.
	4.	The CVD rate for the AR2 POI will be adjusted when AR2 is complete, and the USDOC finalizes the rate, which is not expected until 2021.
	5.	The CVD rate for the AR3 POI will be adjusted when AR3 is complete, and the USDOC finalizes the rate, which is not expected until 2022.

						AR1	West Fraser
						Preliminary	Estimated
							Cash Deposit	Revised Rate2 (Dec. 4, 2017)			Rate3	Rate
	Effective dates for ADD	Rate						(Feb. 3, 2020)
	AR1 POI
	June 30, 2017 - December 3, 20171	6.76%							5.57%	1.57%	1.46%6
	December 4, 2017 - December 31, 2017	5.57%							5.57%	1.57%	1.46%6
	January 1, 2018 - December 31, 2018	5.57%							5.57%	1.57%	1.46%
	AR2 POI
	January 1, 2019 - December 31, 2019	5.57%							5.57%	n/a4	4.65%
	AR3 POI
	January 1, 2020 - September 30, 2020	5.57%							5.57%	n/a5	1.85%
	1.	On June 26, 2017, the USDOC issued its preliminary rate in the ADD investigation effective June 30, 2017.
	2.	On December 4, 2017, the USDOC revised our ADD Rate effective December 4, 2017.
	3.	On February 3, 2020, the USDOC issued its Preliminary ADD Rate for the AR1 POI.
	4.	The ADD rate for the AR2 POI will be adjusted when AR2 is complete, and the USDOC finalizes the rate, which is not expected until 2021.
	5.	The ADD rate for the AR3 POI will be adjusted when AR3 is complete, and the USDOC finalizes the rate, which is not expected until 2022.
	6.	In fiscal 2017, our Estimated ADD was recorded at a rate of 0.9%. AR1 covers both the 2017 and 2018 periods. In 2018 we recorded ADD such that the cumulative rate for the periods covered by AR1 would be 1.46%.
	Duty expense and cash deposits
		July 1 to September 30						January 1 to September 30
	Export duties incurred in the period							2020							2019		2020	2019
	Countervailing duties						$	43	$	32			$			109	$			99
	Antidumping duties							14		10				35					30
	Total						$	57	$	42			$			144	$			129

		July 1 to September 30						January 1 to September 30
	Recognized in the financial statements as							2020							2019		2020	2019
	Export duties recognized as expense in
	consolidated statements of earnings						$	49	$	44			$			126	$			127
	Export duties recognized as export duty
	deposits receivable in consolidated balance sheets
								8		(2)				18					2
	Total						$	57	$	42			$			144	$			129

- 14 -
	We have recorded long-term duty deposits receivable related to CVD for the excess of deposits made at the Cash Deposit Rate of 24.12% compared to the December 4, 2017, Revised Rate of 17.99%, and to ADD for the difference between the 5.57% Cash Deposit Rate and our West Fraser Estimated Rate. The details are as follows:
		January 1 to September 30		January 1 to December 31
	Export duty deposits receivable				2020		2019
	Beginning balance	$			80	$	75
	Export duties recognized as long-term duty
	deposits receivable in consolidated balance sheets
			18			5
	Interest recognized on the long-term duty
	deposits receivable				2		4
	Exchange on the long-term duty deposits				3		(4)
	Ending balance	$			103	$	80
	As at September 30, 2020, export duties paid and payable on deposit with the USDOC are US$368 million for CVD and US$127 million for ADD for a total of US$495 million.
	AR2 and AR3
	AR2 covers the POI from January 1, 2019 through December 31, 2019. The USDOC commenced AR2 during the second quarter of 2020. AR3 covers the POI from January 1, 2020 through December 31, 2020 and is expected to commence in 2021. The results of AR2 are not expected to be finalized until 2021 and AR3 until 2022. Notwithstanding the deposit rates assigned under the investigations, our final liability for the assessment of CVD and ADD will not be determined until each annual administrative review process is complete and related appeal processes are concluded.
	Appeals
	We, together with other Canadian forest product companies and the Canadian federal and provincial governments (the "Canadian Interests"), categorically deny the allegations by the coalition of U.S. lumber producers and disagree with the countervailing and antidumping determinations by the USDOC and the USITC. The Canadian Interests continue to aggressively defend the Canadian industry in this trade dispute and have appealed the decisions to North America Free Trade Agreement ("NAFTA") panels and the World Trade Organization ("WTO").
	On May 22, 2020, the NAFTA panel issued its final decision on "Injury". The NAFTA panel rejected the Canadian parties' arguments and upheld the USITC remand determination in its entirety.
	On August 28, 2020, the WTO dispute-resolution panel ruled unanimously that U.S. countervailing duties against Canadian softwood lumber are inconsistent with the WTO obligations of the United States. The decision confirmed that Canada does not subsidize its softwood lumber industry. On September 28, 2020, the U.S. announced that it would appeal the WTO panel's decision.
	The softwood lumber case will continue to be subject to NAFTA or the new Canada-United States-Mexico Agreement ("CUSMA") and WTO dispute resolution processes, and litigation in the U.S. In the past, long periods of litigation have led to negotiated settlements and duty deposit refunds. In the interim, duties remain subject to the USDOC Administrative Review process, which results in an annual adjustment of duty deposit rates.